Even though farmland values declined, they remained above 2007 levels, the survey reported. What’s more, the majority of the 254 bankers surveyed in the seven-state Fed district expect farmland values to hold steady in the coming months.

Weaker farm incomes, reflecting lower crop and livestock prices, have eroded ag-credit conditions and cut capital spending. Bankers expect larger contractions for both farm income and capital spending in 2009. In addition, softer demand for real estate and capital purchases was reported, and an increase in operating loans for both the crop and livestock sectors is expected.